NEW DELHI: In what can be a big setback for Xiaomi, the Directorate of Revenue Intelligence (DRI) has issued three show-cause notices to Xiaomi Technology India Private Limited for demand and recovery of duty amounting to Rs 653 crore for the period April 1, 2017 and June 30, 2020, under the provisions of the Customs Act, 1962.
The Finance Ministry in a statement on Wednesday said that the evidence gathered during the investigations by the DRI indicated that neither Xiaomi India nor its contract manufacturers included the amount of royalty paid by Xiaomi India in the assessable value of the goods imported by Xiaomi India and its contract manufacturers.
“This violates of Section 14 of the Customs Act, 1962 and Customs valuation (determination of the value of imported goods) Rules 2007. By not adding “royalty and licence fee” into the transaction value, Xiaomi India was evading Customs duty being the beneficial owner of such imported mobile phones, the parts and components,” the ministry said.
The ministry also mentioned that the statements of the key persons of Xiaomi India and its contract manufacturers were recorded, during which one of the directors of the chinese company confirmed the said payments.
During the investigation, searches were conducted by the DRI at the premises of Xiaomi India, which led to the recovery of incriminating documents indicating that Xiaomi India was remitting royalty and licence fees to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., under contractual obligation.
“It was found that the ‘royalty and licence fee’ paid by Xiaomi India to Qualcomm USA and to Beijing Xiaomi Mobile Software Co. Ltd., China (related party of Xiaomi India) were not being added in the transaction value of the goods imported by Xiaomi India and its contract manufacturers,” the statement said.